* FTSE 100 down 0.3 pct, hits lowest since mid-October
* Standard Chartered falls after warning of weaker profits
* Weak U.S. service sector activity offers late session support
By Toni Vorobyova
LONDON, Dec 4 (Reuters) - Britain's FTSE 100 slipped to seven-week lows on Wednesday, weighed down by a surprise warning from Standard Chartered that it could be headed for its first drop in profits in a decade.
Shares in the Asia-focused bank fell 6.5 percent, hitting 16-month lows in volumes more than 4-1/2 times their 90-day daily average after it said overall results will be hit by losses in Korea.
"You've had currency go against them and the picture in the Far East remains complicated. The argument for investing in Standard Chartered isn't as compelling as it was six months ago," said Andrew Morris, head of business development at RC Brown Investment Management.
Although analysts had been cutting estimates for Standard Chartered ahead of the results, overall opinion had been still fairly bullish, with 14 "buy" or "strong buy" ratings, according to StarMine, against 6 "sell" or "strong sell".
The steep drop in Standard Chartered alone took about 7 points off the FTSE 100. Companies trading without entitlement to the latest dividend - including National Grid and Aberdeen Asset Management - together took off another 3.88 points off the index.
Losses on the benchmark though were limited by a 7.3 percent rally in Sage. Shares in the software developer jumped to 12-year highs after it posted a sharp rise in take-up for its "cloud" computing products and raised hopes of a further cash return to shareholders.
The contrasting fortunes of Sage - which increased its dividend by 6 percent versus 2012 - and Standard Chartered on Wednesday underscored both the increasing importance of picking stocks rather than investing in the broader market, as well as continued investor appetite for high-yielding income plays.
"I am concerned a little bit about the returns in the stock market next year," said Chris White, head of UK equities at Premier Asset Management.
"Generally 2014 I would view as a stock-picking year, where you find good value and good dividend yield."
The FTSE 100 closed down 22.46 points, or 0.3 percent, at 6,509.97 points, having recovered from an intra-day seven-week low of 6,479.73 after weaker-than-expected U.S. service sector activity eased concerns about an imminent scaling back of Federal Reserve stimulus.
The index, though, was still down 2.1 percent so far this week, on track for its biggest three-day drop since June.
Such a retreat has disappointed investors who had been banking on a rise in the index this month in a so-called Santa rally - a trend which has seen the FTSE 100 rise in all but two of the last 20 Decembers, according to Datastream data.
However, this time, with the FTSE 100 already up 10.6 percent in 2013 - more than in any of the previous three years - - investors are in a more cautious mood.
"This year has been a lot better than most people would have expected," said Michael Stanes, investment director at Heartwood. "Overall, we remain positive, but we have to admit that we have travelled quite a long way.
"We've hedged as much as a third of our equity risk in some of our strategies to the end of December ... really because we felt that the year has been very strong, some of the indicators were quite bullish and the price of hedging was almost zero. "